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“Korenter” is the Way Forward

Monday, July 2nd, 2018

 

As Korea is trying to adjust to the emerging economic situation in the world, many new innovative ideas are being suggested by Korean intellectuals and leaders. One such idea is “korenter”, emphasizing complete Korean economic integration with regional and world economies, which is propagated by Dr. Yoo Jang-Hee, Korea’s top most leading strategic economic thinker. Quite opposite to what is currently happening in Europe where more countries are opting out of the European Union, Dr. Yoo Jang-Hee is advocating rather Korea should enter the world economy more strongly.

 Currently Dr. Yoo Jang-Hee is an emeritus professor at Ewha Womans University in Seoul, South Korea. Following his undergraduate work in economics at Seoul National University, he earned his M.A in economics at UCLA, and received his Ph.D. from the Department of Economics at Texas A&M University., He also served the Korean government in various positions, including President of Korea Institute for International Economic Policy (KIEP), Vice Chairman of Presidential Council of Economic Advisors, Chairman of the National Commission for Corporate Partnership to name only a few.

 Recently Biz Tech Report had the chance to sit with Dr. Yoo Jang-Hee in his office in downtown Seoul and explore his views on the current global economic situation and options left for Korea to cope with the fast-changing regional and international economic environment.

  Here are the excerpts of the interview. 

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Dr. Yoo Jang-Hee in his office in Seoul


Q1: How do you see the prevailing current economic situation in the world?

Prof. Yoo: The current economic situation in the world is very capricious.  A lot is happening within a short period of time. In this fluid situation countries are trying to protect their economic interests by imposing safeguards and increasing trade tariffs. But this is wrong. All trade disputes must go through the WTO even though it takes a longer time. It is a mechanism that the whole world created to avoid any unfair situations and to restrict the powerful counties from dominating the whole world trading system in a wrong way.

 Q2: Is multilateralism dead? Or is there still some hope left?

Prof. Yoo: In the short run, the multilateralism is going to be on the verge of facing strong attack from the big powers. In the long run however, the whole world is not that patient to live with this anti-multilateralism or power-oriented order of the world trading system, because the whole world has already experienced a better way through which it was able to grow faster. Before WWII, protectionism and nationalism were on top; but because of recognition of the disorder of international trade, 23 major trading countries came together to establish the order of world trade and adopt the GATT in 1947. Since then in 70 years, in a long-term trend, the whole world has been moving toward free trade and multilateralism. So there is still hope left. In the short run, the multilateralism is under attack and may be at a crisis. But in the near future, the whole world is wise enough to come back to the free trade and multilateralism.

 Q3: How do you see the ongoing trade conflict between US and China?

Prof. Yoo: The US economy has enjoyed the free trading system and has been growing normally for the last seven or eight decades. The basic foundation of the US economy and development is freedom, justice, fairness, an open economy, and so on. On the contrary, the Chinese economy is run by one party, one man (almost like an emperor). There is not much of freedom, not much rule of law. The Chinese economy is still controlled by the central government. There are regional governments in China, but these are also controlled and get their orders from the central government. More than fifty-five percent of the Chinese economic activities are somehow related to state-owned enterprises. That's why the Chinese despotic economy is called state capitalism. We have never seen state capitalism as successful for such a long time. If you compare the basis of the US economy with the Chinese economy, the structure of US economy is achieving the so-called universal values but on the contrary, the Chinese economy is moving forward with narrow “wicked” nationalism. I do not think the Chinese way of economic growth will last that long. That has been true for most of human history.

 

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Dr. Yoo Jang-Hee with Dr. Lakhvinder Singh


Q4: What is your take on the Trump administration's anti-free trade approach to global trade? What is behind this whole mess in US's trade policy?

Prof. Yoo: I do not think Trump has the kind of protectionist policies that will stay very long. I think it is a shock and awe approach. The US government is not as infantile as it temporarily appears to be. Trump will be back with multilateralism sooner rather than later.

 Q5. Trump said he will be back with Trans-Pacific Partnership (TPP). Did you hear about it?

Prof. Yoo: Yes I did. He said he will be back with Trans-Pacific Partnership (TPP). All eleven countries said yes to TPP and the Japanese leadership in TPP is impressive. Recently Trump has said a lot of positive words on the new regime of TPP. It is a good sign. Why then is China excluded from TPP?

The reason is that many economists feel the Chinese government is controlling the major industries called state enterprises. Every time the Chinese central government imposes some kinds of economic policies, all these state-run enterprises use the same voice as the central government; no discussions and no opposing voices. These state-run enterprises may look quite effective in the short run, but sooner or later the state-run policies will be found not very successful at the end of the day and rather viewed political and emotional and thus bound to fail.

When Trump uses these economic policies, there are pros and cons discussed all the time. So, Trump would have to modify a little bit like TPP because of the voices from the opposition parties turn out to be right. The Chinese policies by the central government, on the contrary, face no opposition and thus are not bound to be corrected even if they go wrong.

 

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Dr. Yoo Jang-Hee with Dr. Lakhvinder Singh and Ji woo Chung

 

Q6: How do you see China's reactions to anti-free trade approach of the US? Is China going to be the future leader of free trade?

Prof. Yoo: Is China the leader of the free trade economic policies? No way. Chinese economic policies are controlled by the central government. For example, if some industries in China have difficulties, Mr. Xi Jin Ping will come and intervene right away saying the foreign goods and services should not come in this particular sector until the domestic industries find their own survival ways. It is not what we call free trade. It is a dictatorial country and a suppressive government cannot go along well with this WTO-type international free trade show biz for long even if it pretends it is. China’s real face will be exposed soon. USA will remain the undisputed leader of the free trade for long time to come because its founding national spirits are freedom and justice.

 Q7: What do you think of emerging trade tensions in the world? What will be its impact on the global economy?

Prof. Yoo: Currently, with Trump’s America First policy, the WTO system has been challenged greatly. The secretary general of the WTO expressed concerns regarding Trump’s policies. However, the US is run by public opinions because it is a democratic country, a free country and a country run by laws and by the founding spirits. So, most of the 167 WTO member countries (there were only 127 countries when WTO first was established) keep on meeting and proposing better ideas and giving sound advice to Mr. Trump. Trump should listen to the world opinions even though they negate strongly his own opinions. In the short run Trump can use this shock and awe treatment approach, but in the long run, the US must be able to listen to the public opinions of the world. Members of WTO will make it happen. Not only WTO members but also the US markets themselves will surely give him a warning signs.

In the near future there might be some damages, but the world created the WTO systems to face exactly the situations like this. So, we should keep our fingers crossed.

 Q8: How do you see the future of free trade in East Asia? Can the region survive the withdrawal of the US from free trade?

Prof. Yoo: As I mentioned earlier, the US will not withdraw from free trade for long.  Fortunately, the current US economic status looks fine with the lowest unemployment rate in the recent US economic history.   Trump will change his America First policy as the balance of payment of current account improves substantially. Therefore, it will back to multilateralism sooner rather than later. In the meantime, the US government will watch and look at each WTO member country very closely and make a decision as to which country is a “like-minded” country, helping the US cut down its BOP deficits, and which to retaliate against the “America First Policy”. Instead of withdrawing, the US will come back to the multilateralism later on as its whole economy system returns to normal functioning.

At the time when WTO was born, the US was perhaps overly optimistic. For example, when members of WTO adopted the new GATT rules unanimously in 1993, the US might have believed all the member countries would honestly abide by the rules including the Intellectual Property Right rules.  That was the main reason why the US accepted the principle of WTO that everyone has only one vote like US, Monaco and Korea, each has one vote.  Clinton perhaps did not know the possibility that the US is alone when it proposes a constructive idea to improve the effectiveness of WTO.

I think when the US comes back to the next negotiation round of WTO system, it may propose some ways so that larger and more righteous economies may have bigger voices in WTO.

 Q9: South Korea is going through a very tough economic phase at the moment. What options are left for Korea to cope with low economic growth and shrinking exports?

Prof. Yoo: South Korea has gone through many difficult periods; such as the Korean War, many revolutions, the 1997 IMF crisis, and the 2008 world’ financial crisis. Korea has had ample experiences in dealing with crisis and, therefore, its risk management skills are very high and unique. Some Asian member countries even sent delegations here to learn about Korea's risk management during the period of world economic crisis.  They viewed Korea as a country they can emulate to overcome crisis and risks in risky economic situations. So I am optimistic about Korea's return to a normal economy, but the current Korean government seems to depend too much on an income-led growth policy which is basically aiming at spending more money for the low-income families. It is distribution policy rather than income generating policy.

However, I have had answers from the government.  Recently, I came back from the Tokyo International Forum organized by the Nikkei newspaper. More than 400 specialists from around the world, including the Korean Minister of Finance and Economy, Dong Yeon Kim gathered there.  In his speech, he said Korea’s income-led policy is not exactly distributing policy, but it is a policy that he calls "inclusive policy". "Inclusive policy" means the large, medium, and small companies, rich and poor people, and the old and young generation all benefit together by sharing their knowledge, capacity, and experiences. Then, the nation would be able to grow faster and fairer.

 Q10: What is “Korenter”? How does it work? How it can help Korea secure its future?

Prof. Yoo: The concept of “Korenter” is based on the question of how can Korea survive in these turbulent times? Korea has gone through many difficult times in the past and therefore, one could say Korea has been immunized with the world economic crisis. The reason why Korea has many capabilities is because of the founding spirit of the Korean nationhood called Hong Ik Ingan (maximum service to humanity; meaning the whole of humanity is treated as equal). We should be able to live with others in very cooperative way, by serving each other particularly during the difficult times..

Hong Ik Ingan, along with our daily life living concepts like Dure, or Pumashi (exchanging labour or taking turns helping each other) must be our guiding principles for our future economic policies. As an example of Pumashii, when you live in a community with lots of workloads, but one family does not have enough financial resources or labour force then the neighbours are glad to help them and solve the problems. Dure is almost as same as Pumashi except it applies to a larger unit like a nation .

 Q11: Do you want these Korean concepts of Dure, or Pumashi to be taken to an international level?

Prof. Yoo:  Yes. For sure.  This is what Korean way of life is all about. Living for the common good, for the good of others and helping each other in difficult times. Dure or Pumashi is applied when the Korean people believe the whole nation is in trouble. The Koreans would like to work together to solve the problems voluntarily. For example, when an oil ship crashed on the western side of the Korean peninsula on December 7, 2007, volunteers came to clean up the oil along the coastline. The Koreans nationwide came together with their own towels and garbage bins to clean it up themselves. The oil spill along the west coast was cleaned up within a month even without government help. Based on the spirit of Pumashi, the Koreans should help other nations.  During the financial crisis in 2008, Korea was ready to help other developing countries as you see the Seoul Declaration that was adopted when the G20 Summit Meeting was held in Seoul.  The Development Agenda in the Declaration was for that purpose.

  Q12: But Korea's ODA is very low and Korea does not take many refugees?

Prof. Yoo: Korea's ODA has been growing. In the old days, Korea's ODA was less than 0.01% until 2011, but now it is 0.04% of GDP.

Korea was one of the only few countries in the world that took in Vietnamese refugees after the Vietnam War, unlike other countries in Far East Asia. The Vietnamese refugees who mostly settled down in the southern part of South Korea are doing very well and face no discrimination against them or other problems, allowing them to grow and prosper in life. This is one of the reasons why there are so many Vietnamese people in Korea, especially in the countryside. In countryside, many Korean young men also got married to the Vietnamese women.

 Q13: What kind of role you see for Korea in the region?

Prof. Yoo: Korea should enter all good international organizations such as the Trans-Pacific Partnership (TPP), Regional Comprehensive Economic Partnership (RCEP), and the Free Trade Agreement for APEC which was advocated by China and Indo-Pacific cooperation initiated by US. Korea should enter rather than exit different organisations, unlike Britain which is getting out of the EU. Korea should have strong economic relations with all countries in the region. For example, strong Korea - India economic ties can go a long way in prompting peace and prosperity in the region.

 Q14: Do you think Korea can survive the costs of entering the various free trade regimes and agreements?

Prof. Yoo: Yes, there are some costs involved, but the benefits are dearer because all the organizations work for free trade. The EU is seeking free trade with no tariffs and no barriers; however, Britain decided to exit the EU. Unlike Britain, Korea should enter the free trade regimes in a big way.

There is some homework that Korea must do, that is deregulations, especially in the medical and legal service related industries. The KMA (Korea Medical Association) and the KBA (Korea Bar Association) are strong and very aggressively poised against opening up to international competition. However, Korea should be ready to open the market in these service industries as well.

 Q15: How do you see Korea's role in the world in the future?

Prof. Yoo: Korea's role will be bigger not just on the economic side but also in many other areas. Have you ever heard of the billboard chart number 1 group, BTS? BTS is gaining in popularity all around the world.  K-Pop, Korean culture, arts, and sports are getting very popular and spreading around the world in what is called Han Ryu (meaning Korea waves).

Also, think about the religious groups. The number of Korean religious missionaries around the world is highest in terms of the ratio to the population.

I recently went to Mongolia and had the chance to see the Mongolians' love for Koreans and Korean culture. They even call Koreans Solongos, meaning the rainbow.

The time for Korea to have its place under the sun will come soon if not has.

 

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